Court of Appeal Finds Binding Interest Arbitration Statute Unconstitutional

On April 24, 2009, the First Appellate District ruled in Sonoma County v. Superior Court (Sonoma County Law Enforcement Association) that SB440, a labor negotiations interest arbitration statute applicable to public safety unions, violated both Article XI, Section 1(b) and Article XI, Section 11(a) of the California Constitution. This was the first Court of Appeal decision to rule on the constitutionality of SB440 and is an important decision regarding how California public agencies may resolve negotiation impasses with their public safety unions.

Background
In 2000, Governor Davis signed SB402 which created a mandatory system of binding interest arbitration for local police officers and firefighters. SB402 provided that, after impasse had been reached, the employees could request interest arbitration of the disputed issues and the arbitration panel’s decision would be binding.

In County of Riverside v. Superior Court (2003) 30 Cal.4th 278, the California Supreme Court found that SB402 was unconstitutional because it violated the home rule provisions of Article XI, Section 1(b) and Article XI, Section 11(a). Article XI, Section 1(b) of the California Constitution gives the governing body of each California county the plenary authority to provide for the compensation of county employees. Article XI, Section 11(a) prohibits the Legislature from delegating to a private person the power to interfere with local budget authority or to perform other municipal functions. In County of Riverside, the Court held that permitting an unelected arbitrator to make decisions regarding employee compensation and how a local public agency sets its budget violated these Constitutional provisions.

In one of his last acts in office, Governor Davis signed SB440, which was a direct response to County of Riverside. Like SB402, SB440 created a mandatory system of interest arbitration for local police and firefighters. However, SB440 attempted to cure SB402’s constitutional defects by providing that the governing body could reject the arbitration panel’s decision if it voted to do so by a unanimous vote. The revised legislation is set forth in Code of Civil Procedure § 1299 et seq.

The constitutionality of SB440 was before the courts in Sonoma County v. Superior Court (Sonoma County Law Enforcement Association), First Appellate District, A.122450, decided April 24, 2009.

Procedural History
Sonoma County and the Sonoma County Law Enforcement Association (SCLEA) were previously parties to an MOU governing wages, hours, and other terms and conditions of employment for SCLEA's membership. That MOU expired by its terms on June 18, 2007. Prior to its expiration, the parties began negotiations over a new agreement. They were unable to agree on the terms of a successor MOU, and SCLEA declared an impasse in the negotiations in May 2007. After unsuccessful mediations, SCLEA ejected the County’s “last and best offer” and the Board of Supervisors unilaterally implemented its “last and best offer.” SCLEA requested that the impasse be submitted to an arbitration panel per SB440 and the County refused. SCLEA then petitioned the Superior Court to compel interest arbitration.

The Superior Court ruled in SLCEA’s favor and ordered the County to submit to arbitration and the County appealed.

The Court of Appeal Decision: Sonoma County v. Superior Court
On April 24, 2009, the First Appellate District overturned the Superior Court’s decision and held that SB440 was, like its predecessor SB402, unconstitutional.

The Court first found that Sections 1299 et seq. violates Article XI, Section 1(b) because it divests the Board of Supervisors of the ultimate authority to provide for employee compensation. The Court reached its conclusion after reviewing the history of Section 1(b), concluding that it was a "home rule" measure intended to deprive the Legislature of the power to set compensation for county employees. The Court noted that compensation of county employees is a local and not a statewide concern and then explained that there is a clear contrast between the substance of a public employee labor issue and the procedure by which it is resolved, noting that the Legislature could legislate with respect to procedures to resolve labor issues (e.g., the Meyers-Milias-Brown Act). The Court found that fixing salaries is a legislative function whereas the Board of Supervisors' only power under section 1299 et seq. is to reject the decision of the arbitration panel, which is more akin to the veto power traditionally associated with the executive rather than the legislature. Thus, if the Board were to reject the arbitration panel's decision it would prevent another body from establishing compensation but it would not "provide for" compensation, as required by the Constitution. The Court also concluded that the effect of section 1299 et seq. is to empower a minority of the Board to make the arbitration panel's decision binding on the County, even if the majority of the Board disagrees.

The Court also concluded that Sections 1299 et seq. impermissibly delegates to the arbitration panel the power to interfere with county money and to perform the municipal function of setting compensation of county employees, both in violation of Article XI, section 11(a)’s prohibition. The Court found that the ability to reject the arbitration panel's decision by a unanimous vote did not cure the unconstitutional delegation because the statute does not require the Board to ratify the panel's decision; rather, the panel's decision becomes binding without any legislative action at all.

Conclusion
The Sonoma County decision eliminates binding interest arbitration as an option in counties’ negotiations with police and fire unions. Cities also should be able to rely on this decision for the position that police and fire unions may not require cities to submit negotiation disputes to interest arbitration. The Court’s conclusion that Article XI, Section 11(a) is an impermissible delegation should apply equally to cities. And, although the Court’s holding regarding Article XI, Section 1(b) is not directly applicable to cities, cities can argue the Court’s holding should be followed because of cities’ “home rule” rights under Article XI, Section 5 (applicable to charter cities) and Section 7 (applicable to general law cities).